by Mark Johnston
Mortgages are more affordable than at any time in the past 12 years. The average borrowers repayments, today take up just 28% of their take home pay, the lowest level since 1999. By contrast in 2007 mortgage repayments ate up 48% of earnings.
Banks and building societies are continuing to cut mortgage rates as competition in the market increases. The tussle has already seen 5 year fixed rates fall as low as 3.29%.
Fixed rate mortgages continue to tumble with new deals now available from lenders such as HSBC, Yorkshire building society, Leeds building society and the Nationwide.
HSBC offer a 5 year fixed at 3.34% with a fee of £999, borrowers need at least 40% equity. The Yorkshire building society also offer a 5 year fixed at 3.69%, which is slightly higher but with a fee of only £95 on 75% loan to value (LTV). The Nationwide building society has chopped 0.1 of a point off its 5 year fixed rate and now offers the 5 year fixed deal at a rate of 3.69% to those with a 30% deposit and for a fee of £999.
These deals however followed the launch of the Chelsea building society lowest ever 5 year fixed rate at 3.29% available on 70% loan to value (LTV), although the fee for this deal is a staggering £1495.00.
However some other attractive rates have been withdrawn from the market. One in particular from Coventry building society, it has confirmed it is to pull the 4 year fixed at 2.99% deal this week; it was only launched a few weeks ago.
A fixed rate deal however is not amongst the cheapest option and the rates are not always particularly attractive. For example, the Nationwide building society has worked out that if someone has a repayment tracker mortgage for say £150,000 at a rate of 1.99% at present they would pay approximately £760 a month. If they switched to a fixed rate deal, at a rate of 3.05% which is quite a low rate, their payments would be approximately £835 a month.
This therefore means a fixed rate deal could not save them any money, well that is until the base rate increases.
Due to tighter regulations home owners may now in fact find it difficult to switch to cheap fixed rate deals, with the best deals only available to those who have a large deposit or large equity in their homes.
Sue Anderson from the Council of Mortgage Lenders (CML), admits it is not an easy time for some borrowers, adding” what we now see is that lenders are having to hold may be 6 to 8 times more capital, against a 90% loan than against a 60% loan”.
In just over a week the Independent Commission on Banking (ICB) is due to publish its final plans for increasing stability and competition in the UK banking sector.
If its recommendations are implemented, the significant cost implications for the banking sector could result in consumers having to pay more for their borrowing, including mortgages.
How long will the base rate stay this low is always the 64 million dollar question, so if your monthly budget is tight now then may be it might be sensible to consider locking into a rate rather than waiting for a low rate that may never materialise.
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